USAID shutdown should follow all employment-related laws

On January 20, 2025, US President Donald Trump signed dozens of Executive Orders. One Order provides for a 90-day pause in US foreign development assistance for assessment of programmatic efficiencies and consistency with US foreign policy. Following this, there was a resolve to shut down USAID across the globe.

USAID and organisations funded by it were immediately forced to close down and lay off staff. What then is the implication of such drastic lay-offs on employment contracts, specifically in Kenya? The employment relationship in Kenya is governed by Article 41 of the Constitution, the Labour Relations Act and the Employment Act, among other laws. In the case at hand, USAID and other related organisations have three main options on which to base disengagement of their employees. One is to send their employees on unpaid leave, two is to terminate their contracts on the basis of frustration and three is termination based on redundancy. Let’s discuss each.

On the basis of sending employees on unpaid leave, or furloughing, none of the labour laws in Kenya provides for unpaid leave or furlough. Forcing an employee to go for unpaid leave amounts to a unilateral change to the terms of an employment contract. This is forbidden by the Employment Act, which places an obligation on an employer to consult an employee on any changes to terms and conditions of employment. However, there are certain scenarios where an employee can be sent on unpaid leave, but these are limited and within certain legal modalities.

Secondly, frustration is a common law doctrine which enables both suspension and discharge of a contract when an event occurs through no fault of either party to the contract. This leads to resultant cancellation of all rights and obligations under the contract. This doctrine can be invoked by either party and when it does, both are not bound to perform their obligations any more.

For frustration to be invoked, one, the event must occur after formation of the contract, two, the event must not have been provided for in the contract and lastly, the event must not be the fault of either party, or foreseeable. It should be noted that mere hardship or inconvenience is not sufficient to deem the contract as frustrated. It is the employer’s responsibility to demonstrate that the magnitude of the event renders it impossible for the employees to continue discharging their duties under the employment contract.

Finally, termination on basis of redundancy is provided for by Sections 40 and 45 of the Employment Act and can also be included in the employer’s Human Resource Policy and the employment agreement. Redundancy is defined by the Act as ‘the loss of employment, occupation, job or career by involuntary means through no fault of an employee…’ Section 40 details the legal requirements to be met in a termination of employment on account of redundancy, which includes notice to the employee and the labor office, payment of pending leave in cash and payment of severance pay at the rate of not less than fifteen days’ pay for each completed year of service.

Further, when an employer contemplates redundancy, he should first give a general notice of that intention to the employees likely to be affected. This should result to consultation between the employer and employee, prior to a final decision on retrenchment. The decision to be arrived at should not be a sham, but rather genuine in the eyes of a reasonable person. The requirement of consultation is implicit in the principle of fair play under Section 40 of The Employment Act, otherwise the termination would result to unfair termination. Additionally, the employer should provide evidence of the reorganisation in the letter of redundancy, of the particular class of employees affected and the basis of selection with regard to; seniority, skill, ability and reliability.

Finally, it is important to note that different organisations have different structures and policies and it is therefore imperative to ensure the policies meet the minimum requirements provided by relevant legislation to avert any negative legal implications to an organisation in the process of implementing, in this case, release of employees. Consequently, legal advice must be sought before considering such actions.